Puerto Rico Compass ©

Q3 2014: Puerto Rico, The Sum of its Parts

An analysis of 3rd Quarter 2014 economic indices in PR

Puerto Rico’s economic situation raises serious questions about the capacity of policymakers to get the situation under control. Third quarter indices reveal a mixed picture. The economy continues to be stagnant. Full recovery will depend not only on internal but also on external factors originating in the US and other global economies. There is increasing dissatisfaction with local economic policies, escalating electricity prices, and persistently high unemployment. These factors, together with safety concerns and pessimism about the economic future have motivated mass migration to the US. Government has focused principally on the island’s fiscal issues, including liquidity concerns regarding the Government Development Bank (GDB). However, a perfectly balanced budget will mean nothing amidst a devastated economy. This issue addresses the urgent v. important economic issues and tracks the 3Q of the PR economy.

Puerto Rico Economic Pulse ©

September 2014: Households Still Struggling to Recover

A comparative analysis of US and PR households

The “elephant in the room” is debt. The PR economy has a hard time escaping a 0.0% to negative real growth level. Meanwhile, the U.S. continues on sluggish 2.0% growth. Shortly put, the PR theme since 2000 has been: “low interest rates help service the public and private debt burden. Pretend to have a credible plan, but never address the structural problem and simply buy more time.” Are households in PR at the end of the line? Time has caught up. Sustained high unemployment, migration flight, and a tax system built on punishing production and rewarding consumption is not sustainable. Households and government are speeding towards the inflection point at which point debt becomes harder to service because pretend-and-extend policy making has created a depression in investment and growth. PR’s public debt is now at 103% of GNP vs 61% ten years ago. Many households in PR are at the point where cash generated by assets is insufficient to service the debt taken on to acquire the asset, particularly regarding mortgages.